GEO 25/2017 (free translation)

Emergency Ordinance no. 25/2017 amending the content of the appendix to the Government Ordinance no. 7/2013 establishing the tax on windfall gains obtained as a result of price deregulation in the gas sector

– published in The Official Journal of Romania Part I no. 224 of 31 March 2017

Given the effects of entry into force of provisions regarding the fact that, as of 1 April 2017, the acquisition price of gas from domestic production is no longer established by Government decision for household customers and for thermal energy producers, only for the amounts of gas used to produce heat in cogeneration power plants and in thermal power stations intended for household consumption, according to the Government Emergency Ordinance no. 64/2016 amending and supplementing the Electricity and Gas Law no. 123/2012,

taking into account that in the appendix to the Government Ordinance no. 7/2013 establishing the tax on windfall gains obtained as a result of price deregulation in the gas sector, with further amendments and additions, the calculation formula for determining the windfall gains uses, as taxation element, this regulated acquisition price for gas from domestic production for household customers and for thermal energy producers, only for the amounts of gas used to produce heat in cogeneration power plants and in thermal power stations intended for household consumption,

also considering the need to adopt a measure to avoid affecting the financial results of taxpayers in the gas sector that would be taxed for an unachieved income, by maintaining the reference of the price of gas from domestic production intended for resale to non-household consumers at RON 72/MWh; in order to maintain the taxation of income achieved from gas sale to household consumers, it is necessary to determine the reference at an weighted average price of gas from domestic production corresponding to amounts traded on the competitive market for household consumers.

taking into account that failure to promote the change of the calculation formula for determining the windfall gains would lead to failure to tax the volumes of gas sold to household consumers;

taking into consideration the fact that these situations affect the general public interest and are a reason of extreme and extraordinary urgency whose regulation cannot be postponed,

pursuant to art. 115 paragraph (4) of the Constitution of Romania, republished,

The Government of Romania adopts this emergency ordinance.

Art. I. – The Appendix to the Government Ordinance No. 7/2013 establishing the tax on windfall gains obtained as a result of price deregulation in the gas sector, published in the Official Journal of Romania, Part I, no. 53 of 23 January 2013, with further amendments and additions, shall be amended and replaced with appendix to this emergency ordinance.

Art. II. – Provisions of this emergency ordinance shall apply as of 1 April 2017.

PRIME-MINISTER

SORIN MIHAI GRINDEANU

In witness whereof:

Finance Minister,

Viorel Ștefan

Energy Minister,

Toma-Florin Petcu

Bucharest, 30 March 2017.

No. 25.

APPENDIX

(Appendix to the Government Ordinance No. 7/2013)

Calculation formula for windfall gains

Tax on windfall gains due = 0,60 * (VS – royalty * VS – VI)

VS = (PMPC – PRC) * VGC,

where:

VS – windfall gain;

VI – value of investments in the upstream segment during the period for which the windfall gain tax is due;

PMPC – weighted average price of gas from own domestic production sold;

PRC – acquisition price of gas from domestic production for household customers and non-household customers in 2012, respectively RON 45.71/MWh, adjusted with the IPC rate in 2014;

VGC – the gas volumes from domestic production sold;

IPC – the consumer price index published by the Romanian National Institute of Statistics.